"Why is a 16th century medieval government monopoly being used to spur innovation and creative art in the technologically-advanced 21st century?"

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IDEAS AND OWNERSHIP: The concept of protecting ideas and innovation by legal means dates back to antiquity. But many of our existing laws are under strain, their suitability and ultimate purpose called into question.

Here, Philip Soos considers the faults that plague existing copyright laws and suggests that, in an increasingly online world, we need to find more realistic options.

In the past few months, there’s been substantial media interest in the Stop Online Piracy Act (SOPA) bill in the US, introduced ostensibly as an attempt to crack down on intellectual property rights (IPR) violations.

If adopted, this bill would give the US government even more power to deal with those found infringing IPRs than currently exists under the existing legislation – the Digital Millennium Copyright Act (DMCA).

SOPA has spawned a great deal of debate over the merits and demerits of further expanding protection for IPRs. Some claim SOPA would help protect jobs and profit – hence innovation; while many argue SOPA would impinge upon citizens’ right to privacy.

But this debate leaves much to be desired. It consists of arguing IPR protection should be strengthened, weakened or left alone. Few, if any, are critical of the reigning assumption that IPR is a necessary intervention in the economy.

The usual story trotted out is that markets will produce a less than optimal level of research and development and creative works without some form of government intervention. We are told that without such intervention, many of the technologies and modes of entertainment we enjoy today would simply not exist.

Thus the need for copyrights to provide the stimulus for firms to invest to meet consumer wants and needs.

The state-driven tech revolution of the late 1990s has seen an explosion of IPR-protected content being shared over the internet. Evolving technology (such as peer-to-peer networking) has made it easy for almost anyone with a decent internet connection to continuously download and upload files, whether that’s video games, music, books, magazines, comics, TV episodes, films, documentaries, or programs.

Given authorities across the world have often had to catch up to the evolving uses of the internet via legislation, it is difficult for individuals and firms to simultaneously enforce their state-granted rights in many countries, all with differing laws in regards to IPRs.

Industry and governments have certainly tried hard in this respect. Every iteration of copyright protection law appears to be more draconian than the last. It is unsurprising that the US is in the lead of protecting IPR, as its industries are the largest and often most profitable (as in the case of pharmaceuticals and biotech).

The TRIPS and DMCA legislation have clearly done little to prevent file sharing, which appears to be ever-increasing in magnitude. Draconian laws have done little to deter users from violating copyrights and other forms of IPRs.

Online content is really no different to drugs that are currently illegal: people who want them will always get them, with entrepreneurs and cartels operating within the black market to meet demand. The sane course of action is to carefully legalise and regulate the supply of drugs/ content, not impose wildly invasive, expensive and equally ineffective government intervention against producers and consumers.

Ever more draconian legislation has not and will not prevent people from file-sharing and violating IPRs. Industry will claim IPRs, as private property, must be respected. But to claim IPR, as information, should be covered by private property rights is as nonsensical as if the government were to assign a property right to an autoworker’s job, allowing the employee the right to hold it or sell to another.

Ownership under copyright is twisted to the point where consumers do not own the software they purchase; rather, they are merely extended a license to use the software that the company owns.

The problems with copyright (and other forms of IPRs) are extensive. The most obvious flaw is the monopolistic pricing inherent to this form of intervention. Any introductory economic textbook tells us the efficiency is met when outputs are produced and sold at marginal cost – what it costs to produce the next good or service.

In the information age, electronic data or informational goods can be copied for free. Accordingly, this is what goods should be priced at: zero, instead of monopoly pricing.

Ironically, pirates are acting as conventional economists claim people should – that is, they are rational agents seeking to maximise their utility (happiness) by obtaining copies of informational goods at marginal cost.

Other costs include those associated with the court system and patents offices, which have effectively become a joke. People and firms are endlessly suing each other over potential and real copyright infringements, with these legal expenses essentially acting as a tax on innovation that is passed on to consumers.

Bureaucrats at the patent office are under a difficult burden to ensure that software patents are truly innovative and do not violate previously-granted patents.

Under SOPA, citizens’ online activities would be watched and recorded in ever-greater detail, in a futile attempt to crack down on piracy. What industry is calling for is an ever-stronger police state to ensure legislative compliance, despite what the evidence may say about the loss of sales pertaining to piracy.

It should be obvious by now that a new form of funding research, development and creative works needs to be implemented. The cornerstone of any new system should ensure goods are sold at the cost of production: either free on the internet or a few dollars for the physical product. Creative Commons and free software licenses should become the new mode.

The extremes of wealth also need to be avoided: there is no natural law that says Bill Gates should become a billionaire via government monopoly while many creative artists just scrape by.

It is imperative that the wastes and inefficiencies of the IPR system be eliminated and not reproduced under alternative systems.

It is time for some creative thinking on the part of the public (industry isn’t going to help) to design alternate models of financing. Otherwise, the nanny state that operates on behalf of the rich is going to become ever more authoritarian.